MUKTI LAL AGARWALA versus TRUSTEES OF THE PROVIDENT FUND OF THE TIN PLATE CO. OF INDIA LTD. AND OTHERS

Citation: [1956] 1 S.C.R. 100 · Decided: 14-02-1956 · Supreme Court of India · Bench: N. CHANDRASEKHARA AIYAR · Disposal: Disposed off

Judgment (excerpt)

19S6 
February 14 
100 
SUPREME COURT REPORTS 
MUKTI LAL AGARWALA 
v. 
[1956] 
TRUSTEES OF THE PROVIDENT FUND OF 
THE TIN PLATE CO. OF INDIA LTD. 
AND OTHERS. 
' 
[VIVIAN BosE, JAFER IMAM and CHANDRASEKHARA 
AIYAR JJ.) 
Provincial Insolvency Act, 1920 (V of 1920), s. 4-Insolvencv 
of employees of a company-Having certain amounts standing to their 
credit in the Provident Fund of the said company-Whether the •aid 
amounts were the properties of the insolvents over which they had di•-
posing power and were thus available for distribution amongst the 
creditors-Pr<>vident Fund-R<1les-Oonstr1wtion-W ord "property" 
in the Insolvency Act-Meaning of. 
The six employees in the Tin Plate Co. of India Ltd. were 
adjudged insolvents. 
They were members in a Provident Fund of 
the said company, having certain amounts standing to their credit in 
the Fund. 
The appellant-a creditor of the said employees-filed applies· 
tions under s. 4 of the Insolvency Act against the company and 
Trustees of the Fund for orders that amounts standing to the ci:edit 
of the insolvents in the Provident Fun.d account were their proper-
.ties and had vested in the court and were afailable for distribution 
amongst.the creditors and therefore should be brought into conrt. 
The respondent pleaded in answer that the amount standing to 
the credit of ••oh insolvent in the Provident Fund represented the 
contributions of the company and of the employees and that the 
corpus was a trust fund in the hands of the trustees of the fund; 
·so they were not properties of the insolvents over which they bad 
a disposing power and thaHhey were not debts due to ·the insol-
vents. It was said that according to the rules governing the Provi-
dent Fund the monies become payable to the employee or any other 
member of his fa.mily only on the happening of certain contingencies 
snch a.S retirement, discharge. dismidsal or death and that till then 
na right accrued to the in•olvent. It was further urged that the 
trustees could not be removed from the custody and control of the 
fund by the Official Receiver. 
On a. construction of the Rules of the Provident Fond, -the 
Insolvency Court held in favour of the creditor. On appeal, the High 
Court held that under the rules of the Fund, the insolvents· had no 
preaent disposing power over the monies standing to their credit and 
that the Fund had vested in the Trustee. On appeal to the Supreme 
Court: 
Held that it is reasonably clear from these rules that a snbscriber 
~.C.R: 
SUPREME COURT REPOJtTS 
101 
htJos a present interest in the Fund though the moneys may become pay-
able to him, or his nominee or heirs only in the future. Even where 
there is a declaration about the nominee who is to receive payment 
after the subscriber's death, the fund would still be the property of 
the subscriber in the hands of the nominee for the satisfaction of his 
debts, as there is no present gift to take effect immediately. 
It could not be maintained that the subscribers had no right, 
title or interest in the fund or that such interest as they may pos-
sess was dependent upon a possible contingency which may or may 
not occur. The amount standing to the credit of a subscriber even 
if payable in future would be a debt due by the company to him 
within the meaning of s. 60 of the Code and hence liable to attach-
ment and sale. 
A person cannot enter into any arrangement or agreement by 
which his own title will cease in the event of bankruptcy for it 
would then be a fraud perpetrated on the Insolvency Law. 
The liability of the estate to be attached by creditors on a bank-
ruptcy or judgment is an incident of the estate, and no attempt to 
deprive it of that incident by direct prohibition would be valid. 
Notwithstanding the rules of the Fund in the present case, the 
subscribers have an interest in the moneys which can vest in the 
Official Receiver on their adjudication. 
The word "property" in the Insolvency Act is used in the 
widest possible sense which includes even property which may be-
long to or-is vested in another but over which the insolvent has a 
disposing power which he may exercise for his own benefit; and 
this part of the definition has reference obviously to powers of ap· 
pointment and the power of a Hindu father who is the managing 
member of a joint family. 
The fact that on the. date of the adjudi-
cation the insolvent could not transfer the property does not militate 
against the view that he has a vested int

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